Are Tolls the Only Option for Infra. Funding?

If we don’t build it – and maintain it, and repair it – they won’t come, and we can’t go.

But we can’t build, maintain or repair it if we don’t fund it.

If you will forgive a litany of mixed metaphors, this is not a chicken and egg problem. It is the direct result of decades of childish “neener, neener” level finger pointing and kicking the can down the road in the political hope that complicated and nuanced political and economic issues will become someone else’s problems.

That’s not a partisan statement. There is an abundance of blame to go around regardless of one’s political orientation.

As I write this on January 22, the government is in another shutdown. Meanwhile, President Trump is hinting that portions of his long-touted $1T infrastructure plan may be announced in the coming weeks.

More States Looking at Tolls

A Jan. 18 National Public Radioreport stated more and more states are looking at tolls as a means to shore up their funding for roads and other infrastructure projects. States that already have tollways in place are raising or considering raising their rates.

It’s not hard to understand why. Gas taxes, a primary vehicle for funding infrastructure projects, have sat at the same rate for almost 25 years, even as vehicle efficiency and lifestyle changes means the average driver is using less gas.

While there is a broad desire for increased funding, the political climate of the past decade, and the economic turbulence that immediately preceded it, have generated a hesitancy to even talk about tax increases, much less a motivation to implement them.

The NPR report quoted Carl Davis, research director for the Institute on Taxation and Economic Policy, as saying, “I think the states over time have lost hope in the federal government enacting a real, long-term infrastructure package. And so, they’ve taken matters in their own hands and boosted funding on their own.”

The broad overview floated by the Trump Administration a year ago called for $200B in seed money to encourage $800B in private infrastructure investment. The caveat is, private investors require a return. As such, the infrastructure projects to be undertaken have to have an attached revenue stream.

Tolls or user fees are the most straightforward ways to achieve that, but they are immensely unpopular in much of the country.

Stephanie Kane, spokesperson for the Alliance for Toll-Free Interstates, quoted by NPR, called tolls, “the worst funding mechanism available. No other road funding mechanisms come with half as long a list of drawbacks and disruptions for the communities where they’re located,” she said.

Among the many problems opponents list with tollways are the fact that many drivers will take alternate routes, increasing the load on non-toll routes, and that many see it as a double payment on top of the gas tax.

Davis noted 26 states have increased their own gas taxes in recent years, a highly unusual occurrence, historically. That, however, is not sufficient to cover the gaps across the board.

As federal funding lags, political gridlocks drag on and states’ needs – including here in Arizona – grind on without apparent relief in sight, the public-private partnership/return-on-investment-based approach appears to many to be the quickest way forward.

The State of Affairs

Back in December we covered a survey put out by Forbes Insights on infrastructure challenges and opportunities. (AZBEX; Dec. 1, 2017). Respondents gave the state of U.S. infrastructure a “C” grade, and 64 percent said the nation was “significantly underinvesting”.

We reported, “The majority (69 percent) of respondents say the public sector needs to do more to promote and empower the sale or lease of infrastructural components to the private sector, and half (49 percent) say officials need to cut barriers to ‘the sale or lease of government assets.’ If enacted, respondents claim, public-private partnerships would be easier to enact and become more common.”

Sixty-five percent of responding infrastructure investors and providers listed the U.S. as either their first, second or third choice for attractive marketplaces.

Arizona Needs Work

In an August report, the American Society of Civil Engineers graded Arizona’s bridges as “B”, but gave its roads a “D+”, with an overall infrastructure grade of “C”. (AZBEX, Aug. 8, 2017)

In-state and federal tax and revenues and user fees are the state’s leading infrastructure funding source, but, “Only 51 percent of fees like the Vehicle License Tax are actually used for transportation, and federal funding has become unreliable,” according to the report.

A Cultural Shift?

Tax increases, tolls and user fees, alone or in some combination, are the most commonly discussed mechanisms for increased infrastructure funding.

Of these, user fees encounter the most resistance. Generally speaking, a per-mile charge would apply and drivers would be based on their amount of actual infrastructure usage. Opponents, however, note the exceptionally deep privacy concerns that would accompany tracking exactly when people drove and where they went.

The argument against any kind of new taxation took root in the 1990s and has only gotten more deeply entrenched.

Tolls, including tollways with franchise options, are increasingly under review. As part of a franchise option, in addition to the user charge, companies that want to operate along the tollway – gas stations, fast food outlets, etc. – would pay the state (or the managing P3) a licensing fee for exclusive rights to do business there for a period of time.

That might be one way to keep the burden minimal to users hastening the availability and breadth of funding.

Regardless of the ultimate solution, the current shape of Arizona’s roadways, the unwillingness of leaders to compromise at any level of government and the lack of any simple and obvious answer means infrastructure users, advocates and leaders have to keep every option on the table until a solution can be reached.